A plan fails the ADP test. HCE 1 deferred 10% and the amount to be returned is determined by reducing his deferrals to 8%. HCE 2 actually receives the distribution to correct the test. The employer match was dollar for dollar. Whose match gets forfeited to comply with 401(a)(4)? Was this addressed in any legislation?

Thanks in advance.

I would guess HCE 2 gets hit a second time. Even though you don't rerun the test under the new rules, it is his deferral that got returned, and therefore at a given moment in time he has received a match in greater % than anyone else.

I would agree that HCE 2 -- the participant who actually received the refund -- takes the forfeiture hit.